Forex Options Trading

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Forex Options Trading http://www.theforexnittygritty.com/forex-trading/forex-options-trading There are three good reasons for Forex options trading. In international business transactions Forex options trading helps hedge currency risk. In volatile markets Forex options trading both helps limit risk while providing profit potential. And traders can use Forex options trading to provide extra leverage for their trading capital. Here are snapshots of each reason for Forex options trading. Limiting Currency Risk When a Japanese airline signs a contract to buy a Boeing jet they will eventually have to pay in US dollars. They may already have the money but will not pay until the jet is delivered a year or two later. What happens if the US Dollar rises in value versus the Japanese Yen? That will make the airplane more expensive. The company could just pay up front but they probably have good use for the money while they are waiting. They could also change their Yen to dollars and wait. Alternatively they can use Forex options trading to contain their currency risk. The company buys calls on the US Dollar with Yen. The cost of this is much less than the money put aside for the airplane. If the dollar goes up the Japanese airline will execute the contract and obtain the necessary amount in dollars. If the dollar goes down they will let the contract expire and end up paying less for the airplane when they convert to dollars. This is the junction of Forex trading and currency risk. Staking Out Positions in a Volatile Market There are times when it is difficult to know which way a currency pair will go. When there are very volatile foreign currency rates traders can use options to limit their trading risk and leverage their trading capital. A basic and fairly common strategy is called a long straddle. A trader buys both a put and a call on one currency with the other. If the currency pair moves significantly in either direction the trader will execute the put or the call and make money. The risk in this strategy is that the currency pair ceases to be volatile in which case the maximum loss is the price of the two options contracts. Getting a Lot for a Little Leverage is a useful aspect of Forex options trading.

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  • 1. Forex Options TradingBywww.TheForexNittyGritty.com

2. There are three good reasons for Forexoptions trading.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 3. In international business transactions Forexoptions trading helps hedge currency risk.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 4. Before We ContinueClick the links below to get yourFREE training materials.Free Weekly Investing WebinarsDont miss these free training events!http://www.profitableinvestingtips.com/free-webinarForex Conspiracy ReportRead every word of this report!http://www.forexconspiracyreport.comGet 12 Free Japanese Candlestick VideosIncludes training for all 12 major candlestick signals.http://www.candlestickforums.com 5. In volatile markets Forex options tradingboth helps limit risk while providing profitpotential.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 6. And traders can use Forex options trading toprovide extra leverage for their tradingcapital.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 7. Here are snapshots of each reason forForex options trading.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 8. Limiting Currency Riskhttp://www.theforexnittygritty.com/forex-trading/forex-options-trading 9. When a Japanese airline signs a contract tobuy a Boeing jet they will eventually have topay in US dollars.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 10. They may already have the money but willnot pay until the jet is delivered a year or twolater.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 11. What happens if the US Dollar rises in valueversus the Japanese Yen?http://www.theforexnittygritty.com/forex-trading/forex-options-trading 12. That will make the airplane more expensive.The company could just pay up front butthey probably have good use for the moneywhile they are waiting.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 13. They could also change their Yen to dollarsand wait. Alternatively they can use Forexoptions trading to contain their currency risk.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 14. The company buys calls on the US Dollarwith Yen.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 15. The cost of this is much less than the moneyput aside for the airplane. If the dollar goesup the Japanese airline will execute thecontract and obtain the necessary amount indollars.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 16. If the dollar goes down they will let thecontract expire and end up paying less forthe airplane when they convert to dollars.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 17. This is the junction of Forex trading andcurrency risk.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 18. Staking Out Positions in a Volatile Markethttp://www.theforexnittygritty.com/forex-trading/forex-options-trading 19. There are times when it is difficult to knowwhich way a currency pair will go. Whenthere are very volatile foreign currency ratestraders can use options to limit their tradingrisk and leverage their trading capital. Abasic and fairly common strategy is called along straddle.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 20. A trader buys both a put and a call on onecurrency with the other. If the currency pairmoves significantly in either direction thetrader will execute the put or the call andmake money.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 21. The risk in this strategy is that the currencypair ceases to be volatile in which case themaximum loss is the price of the two optionscontracts.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 22. Getting a Lot for a Littlehttp://www.theforexnittygritty.com/forex-trading/forex-options-trading 23. Leverage is a useful aspect of Forex optionstrading. A trader limits his cost in trading tothe price of the options contract and doesnot buy or sell currency.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 24. If the currency pair moves in the expecteddirection the trader need not even executethe contract. Rather he can simply make theopposite trade and exit the contract, takinghis profit with him.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 25. Forex options trading allows a trader topreserve trading capital while swing tradingcurrency pairs.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 26. Technical and fundamental analysis of Forexpairs is essential in picking the right tradebut the advantages of limiting risk andgaining leverage make Forex options tradingattractive.http://www.theforexnittygritty.com/forex-trading/forex-options-trading 27. As always, and even when trading optionson currencies, stay out of trades that you donot understand and always do your ownhomework.http://www.theforexnittygritty.com/forex-trading/forex-options-trading